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Recession’s over – Now what?
Posted on November 19, 2010 by igorluksic
It’s official: Montenegro has defeated the recession. Third-quarter 2010
data shows that GDP has stopped contracting. We therefore have good
reason for optimism, yet much work lies ahead. So let’s spend a minute
on what Montenegro has been through last two years, and another on
what comes next.
Since we economists love to condense long and complex stories into
simple graphs, I put together the following illustration on real GDP for
Balkan countries based on data from the latest IMF report (2006 = 100%).
This sketch illustrates the two-faced nature of growth: Montenegro
soared high during its post-independence boom, then fell back to earth
after the financial crisis crossed our borders.
What shapes this balance? The forces include competitiveness and a
stable business environment, along with a constructive attitude toward
financing individuals who have good ideas. Montenegro seems to
understand this rule — see the World Economic Forum’s latest Global
Competitiveness Report or the World Bank’s Doing Business 2011
survey. The World Bank and the IMF have raised their projections for
Montenegro’s 2010 GDP growth, bringing them in line with the Finance
Ministry’s own forecasts. Montenegro successfully debuted on the
Eurobond market in September 2010, which was widely considered a
positive development for the entire region.
Yet Montenegro needs to overcome obstacles that hamper further
development. The EU’s mantra is that corruption and crime are the
primary villains, but this contradicts what many business people say:
Just 8.4% of experts surveyed in the WEF’s Global Competitiveness
Report cited corruption as one of the top barriers to business; by contast,
18.4% pointed to poor infrastructure and some 12% identified excessive
bureaucracy and lack of trained workforce as the chief culprits.
There are other hurdles. Credit rating agencies never miss a chance to
point out the threat of a structural deficit. The World Bank’s Doing
Business report stresses that our regulatory systems need to be
streamlined. Furthermore, there is still a lot to be done in terms of roads,
energy and anything that fits the broad term “investment.”
The good news is, these investments are under way with help from
businesses from all over Europe that greatly expand Montenegro’s
limited spending ability. This country that now relies on imported
electricity will begin harvesting clean energy from the wind and the
waters. We are connecting Montenegro to Europe’s motorway system.
We are modernizing our utility companies with foreign cash.
We must focus on promoting the components that will drive growth once
emerging-market investment fever subsides in the West. Montenegro
will someday cease to be classified as a transition economy and will
have to carry its own weight. When this time comes, we want to make
sure investors view our country as a place where they can avail
themselves of all the scientists, engineers and skilled workers they need
for their new companies. What’s more, they will be able establish a firm
in a single week – and they will not consider this to be out of the ordinary.
Let’s assume this was the conclusion for today, and just add some
micro-support for the positive macro data: here, here and here.
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